(Bloomberg) — Mexico’s Pemex has too much gasoline and nowhere to store it, potentially racking up significant ship fees as demand wanes because of the fast-spreading coronavirus.
A lack of storage capacity in Mexico is forcing the state-owned oil company to leave its fuel purchases in ships off the coast of Mexico, according to three people familiar with the situation and ship-tracking data. Now as much as 3 million barrels of refined products are sitting in tankers off of Mexico’s coast.
Mexico has been late to experience the demand slump that has hit other nations because President Andres Manuel Lopez Obrador initially refused to enact stringent measures in response to the coronavirus pandemic. But now sales have fallen between 40% and 50% at some of Mexico’s biggest privately-owned gas stations in the past two weeks, according to three major fuel importers and retailers in Mexico, who asked to remain anonymous because the information is private.
The squeeze is especially tough for Pemex, whose bonds were cut to junk by Moody’s Corp. on Friday after 15 years of oil production declines and losses that almost doubled last year. Pemex’s debt load is the highest of any oil major. With Pemex’s six refineries operating at less than 30% of their capacity, it imports about 65% of Mexico’s gasoline needs, mostly from the U.S. The country was American refiners’ biggest customer, bringing in about 500,000 barrels a day last year.
Pemex didn’t immediately respond to a request for comment.
Last December, Mexico’s Energy Ministry changed regulations that would have gradually raised the country’s minimum fuel inventory requirement, which is currently set at five days for gasoline and diesel. Pemex has fuel storage capacity for about three to five days.
The current cost of holding a cargo in a ship off major Mexico ports past the delivery date, known as demurrage, is $25,000 a day, according to shipping rates provided to Bloomberg by a person familiar with the market.
There are at least six tankers carrying fuel anchored near the port of Pajaritos on Mexico’s east coast, while several more tankers are waiting at the ports of Tuxpan, Altamira and Dos Bocas, according to ship-tracking data, and two of the people.
One tanker, the British Seafarer, has been anchored near Pajaritos for a month because there’s no demand, or storage space, for its cargo of regular gasoline, said one of the people.
Mexico’s gasoline demand has fallen by about 60% and diesel 35% in the first half of April, according to a preliminary study by Onexpo, the national fuel retailer association. In some metropolitan areas sales have been reduced by as much as 70% because of social distancing to combat the coronavirus pandemic, Onexpo said. In rural areas, the drop is less pronounced, at about 30%, since diesel is still necessary for agricultural machinery and product transport.